Nearly 2.5 crore, or 30 per cent, of all provident fund accounts have a negative balance, some of which may be due to fraudsters who faked withdrawal claims to siphon off money by opening bank accounts using forged identity documents.
The PF department, startled by these two separate findings made over the last few days, has swung into damage-control mode, issuing strict instructions to field offices to fix responsibility for these lapses, correct the spectre of negative balances and ensure that no fake claims get through the system.
Employees' Provident Fund Organisation (EPFO) chief vigilance officer Sanjay Kumar has flagged an internal investigation that has found fraudulent withdrawals, orchestrated in accounts that have not had fresh inflows for years. Such claims managed to evade all checks and balances in the system and PF staffers were pressured using 'all possible means' to clear these fake claims swiftly.
Insiders seem to have colluded with the scamsters in identifying dormant accounts and actively facilitating their loot. This also brings into question the Know Your Customer or KYC norms followed by banks. "The claims were settled by putting pressure on dealing hands/office by all possible means. In all these cases, the amount settled had been sent through NEFT (electronic funds transfer) in the bank accounts opened with forged identity," Kumar has said in a letter warning EPFO's field offices about the scam. "This has been the modus operandi that has been used in the EPF office over the years, but we have said this is unacceptable and initiated action against it," said a senior official.
He, however, said that all such fraudulent withdrawals may not be criminal in nature as some employers often create PF accounts for their relatives showing them as employees.
In April 2011, the EPFO stopped crediting interest on PF accounts that hadn't seen fresh contributions for three years.
At the time, 3.04 crore such PF accounts with nearly Rs 16,000 crore in balances were considered inoperative or dormant. The number of accounts with negative balances is quite close, though officials say there is likely only a partial overlap between accounts with dormant PF savings and negative balances. "We have identified around 2.5 crore PF accounts where the balance is negative, many of which seem to have occurred because accounts weren't updated in a timely manner and claims were often settled even if there wasn't an adequate balance accrued in these accounts," said a senior PF official.
The discovery was made thanks to EPFO's recent drive to clean up its books and bring all members' accounts up to date. The annual interest credited to PF accounts was worsening the hole in accounts with negative balances, he explained. While the cumulative negative balance in these 2.5 crore PF accounts couldn't be ascertained, Central PF Commissioner KK Jalan is learnt to have issued strict directions to rectify the problem at a meeting last week "At least 25 per cent negative balances are to be cleared by this month and a further 25 per cent by December 2013," said a senior official who was present at the meeting. "If these targets are not met, regional PF bosses have been told to treat such accounts as cases of "over payment" and initiate action against those responsible to recover these 'overpaid' amounts," he said.
According to the CBI, four employees of the private firm, B L Kashyap and Sons (BLKS), have been named in its FIR and searches were carried out at 23 locations in Delhi, NCR and other parts of the country.
The EPFO officials against whom the case has been registered included S K Khanna, the then Additional Central Provident Fund Commissioner (North Zone), currently posted in the same capacity in Chandigarh; M S Kalia, the then Regional Provident Fund Commissioner-1, Delhi (South), now posted as RPFC Ludhiana; and C S Gogna, the then Enforcement Officer, EPFO, Delhi (South), currently working in Jaipur. Apart from these enforcement officers, the CBI also named Bikas Roy, Anup Sharma, Promila Singh, Rajeev Mukherjee, Sudhir Batra and R S Tawar.
The allegations against the EPFO officials is that they entered into a criminal conspiracy with four officials of BLKS. CBI spokesperson Dharini Mishra said, "In pursuance to this criminal conspiracy the accused allegedly created false records in respect of certain employees engaged, inflated the number of excluded employees, manipulated the period of engagement of employees and thereby manipulated the amount of Provident Fund liability which was due and payable by the said firm."
The PF department, startled by these two separate findings made over the last few days, has swung into damage-control mode, issuing strict instructions to field offices to fix responsibility for these lapses, correct the spectre of negative balances and ensure that no fake claims get through the system.
Employees' Provident Fund Organisation (EPFO) chief vigilance officer Sanjay Kumar has flagged an internal investigation that has found fraudulent withdrawals, orchestrated in accounts that have not had fresh inflows for years. Such claims managed to evade all checks and balances in the system and PF staffers were pressured using 'all possible means' to clear these fake claims swiftly.
Insiders seem to have colluded with the scamsters in identifying dormant accounts and actively facilitating their loot. This also brings into question the Know Your Customer or KYC norms followed by banks. "The claims were settled by putting pressure on dealing hands/office by all possible means. In all these cases, the amount settled had been sent through NEFT (electronic funds transfer) in the bank accounts opened with forged identity," Kumar has said in a letter warning EPFO's field offices about the scam. "This has been the modus operandi that has been used in the EPF office over the years, but we have said this is unacceptable and initiated action against it," said a senior official.
He, however, said that all such fraudulent withdrawals may not be criminal in nature as some employers often create PF accounts for their relatives showing them as employees.
In April 2011, the EPFO stopped crediting interest on PF accounts that hadn't seen fresh contributions for three years.
At the time, 3.04 crore such PF accounts with nearly Rs 16,000 crore in balances were considered inoperative or dormant. The number of accounts with negative balances is quite close, though officials say there is likely only a partial overlap between accounts with dormant PF savings and negative balances. "We have identified around 2.5 crore PF accounts where the balance is negative, many of which seem to have occurred because accounts weren't updated in a timely manner and claims were often settled even if there wasn't an adequate balance accrued in these accounts," said a senior PF official.
The discovery was made thanks to EPFO's recent drive to clean up its books and bring all members' accounts up to date. The annual interest credited to PF accounts was worsening the hole in accounts with negative balances, he explained. While the cumulative negative balance in these 2.5 crore PF accounts couldn't be ascertained, Central PF Commissioner KK Jalan is learnt to have issued strict directions to rectify the problem at a meeting last week "At least 25 per cent negative balances are to be cleared by this month and a further 25 per cent by December 2013," said a senior official who was present at the meeting. "If these targets are not met, regional PF bosses have been told to treat such accounts as cases of "over payment" and initiate action against those responsible to recover these 'overpaid' amounts," he said.
According to the CBI, four employees of the private firm, B L Kashyap and Sons (BLKS), have been named in its FIR and searches were carried out at 23 locations in Delhi, NCR and other parts of the country.
The EPFO officials against whom the case has been registered included S K Khanna, the then Additional Central Provident Fund Commissioner (North Zone), currently posted in the same capacity in Chandigarh; M S Kalia, the then Regional Provident Fund Commissioner-1, Delhi (South), now posted as RPFC Ludhiana; and C S Gogna, the then Enforcement Officer, EPFO, Delhi (South), currently working in Jaipur. Apart from these enforcement officers, the CBI also named Bikas Roy, Anup Sharma, Promila Singh, Rajeev Mukherjee, Sudhir Batra and R S Tawar.
The allegations against the EPFO officials is that they entered into a criminal conspiracy with four officials of BLKS. CBI spokesperson Dharini Mishra said, "In pursuance to this criminal conspiracy the accused allegedly created false records in respect of certain employees engaged, inflated the number of excluded employees, manipulated the period of engagement of employees and thereby manipulated the amount of Provident Fund liability which was due and payable by the said firm."
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